SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant / X /
Filed by a party other than the Registrant / /
Check the appropriate box:
/ x / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e) (2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Sec. 240.14a-11(c) or Sec. 240.14a-12
PUTNAM MASTER INTERMEDIATE INCOME TRUST
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement,
if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
/ X / No fee required
/ / Fee computed on table below per Exchange Act Rule 14a 6(i)(1) and 0-11
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
IMPORTANT INFORMATION FOR SHAREHOLDERS IN
PUTNAM MASTER INTERMEDIATE INCOME TRUST
The document you hold in your hands contains your proxy statement and
proxy card. A proxy card is, in essence, a ballot. When you vote your
proxy, it tells us how to vote on your behalf on important issues
relating to your fund. If you complete and sign the proxy, we'll vote
it exactly as you tell us. If you simply sign the proxy, we'll vote
it in accordance with the Trustees' recommendations on page 4.
We urge you to spend a couple of minutes with the proxy statement,
and either fill out your proxy card and return it to us via the mail,
or record your voting instructions via the Internet. When
shareholders don't return their proxies in sufficient numbers, we
have to incur the expense of follow-up solicitations, which can cost
your fund money.
We want to know how you would like to vote and welcome your comments.
Please take a few moments with these materials and return your proxy
to us.
[Putnam Scales Logo]
Table of contents
A Message from the Chairman................................................ 1
Notice of Shareholder Meeting.............................................. 3
Trustees' Recommendations.................................................. 4
Proxy card enclosed
If you have any questions, please contact
us at the special toll-free number we have
set up for you (1-800-225-1581)
or call your financial advisor.
-----------------------------------------------
A Message from the Chairman
Dear Shareholder:
[Photo of John A. Hill]
I am writing to you to ask for your vote on important questions that affect
your investment in your fund. While you are, of course, welcome to join us at
your fund's meeting, most shareholders cast their vote by either filling out
and signing the enclosed proxy card or by voting via the Internet. Instructions
are listed at the top of your proxy card. We are asking for your vote on the
following matters: (1) fixing the number of Trustees and electing your fund's
Trustees; and (2) converting your fund from a closed-end fund to an open-end
fund.
Your Trustees unanimously recommend that shareholders vote "For" the first
proposal. On the second proposal, whether to convert Putnam Master Intermediate
Income Trust to an open-end fund, the Trustees, including the Trustees who are
not affiliated with the fund's manager, unanimously recommend that shareholders
vote "Against" the conversion. The second proposal is on the agenda as a result
of provisions in your fund's governing legal documents that require that
shareholders be given the opportunity to consider a conversion in the event the
fund's shares trade at a discount from net asset value greater than 10% over a
specified period of time.
The Trustees believe that remaining a closed-end fund provides significant
investment benefits that are not available to open-end funds. In general, if
the fund remains a closed-end fund, the portfolio manager can continue to
manage the fund with a steadier, longer term perspective without the short-term
pressures from sales and redemptions of fund shares typically experienced by
open-end funds. Under some circumstances this flexibility can allow a
closed-end fund to out-perform an open-end fund with a similar investment
strategy. In addition, a conversion to open-end status is likely to result in a
lower yield because of increased fund expenses. This result would be
inconsistent with the fund's investment objective of seeking high current
income consistent with preservation of capital.
Despite the advantages of maintaining your fund's closed-end status, you would
receive a short-term benefit if the fund were
1
converted to open-end status. As of January 31, 2001, shares of your fund were
trading at a 6.75% discount to their net asset value. Upon conversion of the
fund, your shares would be redeemable at their net asset value with no
discount, subject to the imposition by the Trustees of a redemption fee payable
to the fund. Of course the size of the discount fluctuates and may be greater
or lesser than 6.75% at the time any conversion goes into effect. While it may
appear that your shares of the fund would increase in value by 7% upon
conversion, transaction costs involved with selling a portion of your fund's
portfolio would reduce this gain.
The Trustees do not believe that the current level of discounts justifies the
fundamental changes that would result from conversion, and are therefore
recommending that you vote against the conversion.
Although we would like very much to have each shareholder attend his or her
fund's meeting, we realize this is not possible. Whether or not you plan to be
present, we need your vote. We urge you to vote on the Internet or complete,
sign, and return the enclosed proxy card promptly. A postage-paid envelope is
enclosed.
I'm sure that you, like most people, lead a busy life and are tempted to put
this proxy aside for another day. Please don't. When shareholders do not return
their proxies, their fund may have to incur the expense of follow-up
solicitations. All shareholders benefit from the speedy return of proxies.
Your vote is important to us. We appreciate the time and consideration that I
am sure you will give this important matter. If you have questions about the
proposals, contact your financial advisor or call a Putnam customer service
representative at 1-800-225-1581.
Sincerely yours,
[Signature of John A. Hill]
John A. Hill, Chairman
2
PUTNAM MASTER INTERMEDIATE INCOME TRUST
Notice of Annual Meeting of Shareholders
> This is the formal agenda for your fund's shareholder meeting. It tells
you what matters will be voted on and the time and place of the meeting,
if you can attend in person.
To the Shareholders of Putnam Master Intermediate Income Trust:
The Annual Meeting of Shareholders of your fund will be held on June 14,
2001 at 2:00 p.m., Boston time, on the eighth floor of One Post Office
Square, Boston, Massachusetts, to consider the following: 1. Fixing the
number of Trustees and electing Trustees. See page 6.
2. Approving or disapproving the conversion of your fund from closed-end to
open-end status and authorization of related amendments to your fund's
Agreement and Declaration of Trust. See page 21.
By the Trustees
John A. Hill, Chairman
George Putnam, III, President
Jameson A. Baxter John H. Mullin, III
Hans H. Estin Robert E. Patterson
Ronald J. Jackson A.J.C. Smith
Paul L. Joskow W. Thomas Stephens
Elizabeth T. Kennan W. Nicholas Thorndike
Lawrence J. Lasser
WE URGE YOU TO MARK, SIGN, DATE, AND MAIL THE ENCLOSED PROXY IN THE
POSTAGE-PAID ENVELOPE PROVIDED OR RECORD YOUR VOTING INSTRUCTIONS VIA THE
INTERNET SO YOU WILL BE REPRESENTED AT THE MEETING.
April 12, 2001
3
Proxy Statement
> This document will give you the information you need to vote on the
matters listed on the previous page. Much of the information in the proxy
statement is required under rules of the Securities and Exchange
Commission ("SEC"); some of it is technical. If there is anything you
don't understand, please contact us at our special toll-free number,
1-800-225-1581 or call your financial advisor.
> Who is asking for your vote?
The enclosed proxy is solicited by the Trustees of Putnam Master
Intermediate Income Trust for use at the Annual Meeting of Shareholders of
the fund to be held on June 14, 2001, and, if your fund's meeting is
adjourned, at any later meetings, for the purposes stated in the Notice of
Annual Meeting (see previous page). The Notice of Meeting, the proxy and
the Proxy Statement are being mailed on or about April 16, 2001.
< How do your fund's Trustees recommend that shareholders vote on these
proposals?
The Trustees recommend that you vote
1. For fixing the number of Trustees as proposed and the election of all
nominees; and
2. Against converting your fund from closed-end to open-end status and
authorizing certain related amendments to your fund's Agreement and
Declaration of Trust.
4
> Who is eligible to vote?
Shareholders of record at the close of business on March 23, 2001 are
entitled to be present and to vote at the meeting or any adjourned
meeting.
Each share is entitled to one vote. Shares represented by duly executed
proxies will be voted in accordance with your instructions. If you sign
the proxy, but don't fill in a vote, your shares will be voted in
accordance with the Trustees' recommendations. If any other business is
brought before your fund's meeting, your shares will be voted at the
Trustees' discretion.
5
The Proposals
I. ELECTION OF TRUSTEES
> Who are the nominees for Trustees?
The Board Policy and Nominating Committee of the Trustees of your fund
makes recommendations concerning the Trustees of that fund. The Board
Policy and Nominating Committee consists solely of Trustees who are not
"interested persons" (as defined in the Investment Company Act of 1940) of
your fund or of Putnam Investment Management, LLC, your fund's investment
manager ("Putnam Management").
The Board Policy and Nominating Committee of the Trustees of your fund has
fixed the number of Trustees at twelve and recommends that you vote for
the election of the nominees described below. Each nominee is currently a
Trustee of your fund and of the other Putnam funds.
> Jameson Adkins Baxter
[Photo of Jameson Adkins Baxter]
Ms. Baxter, born September 6, 1943, is the President of Baxter Associates,
Inc., a management consulting and private investment firm that she founded
in 1986. During that time, she was also a Vice President and Principal of
the Regency Group, Inc. and a Consultant to First Boston Corporation, both
of which are investment banking firms. From 1965 to 1986, Ms. Baxter held
various positions in investment banking and corporate finance at First
Boston. Ms. Baxter currently also serves as a Director of Banta
Corporation, Ryerson Tull and ASHTA Chemicals, Inc. She is also the
Chairman Emeritus of the Board of Trustees of Mount Holyoke College,
having previously served as Chairman for five years and as a Board member
for thirteen years; an Honorary Trustee and past President of the Board of
Trustees of the Emma Willard School; Member of the Board of Governors of
Good Shepherd Hospital; and Chair of the
6
Nominees for Trustees
National Center for Non-profit Boards. Ms. Baxter is a graduate of Mount
Holyoke College.
> John A. Hill
[Photo of John A. Hill]
Mr. Hill, born January 3, 1942, is Chairman of the Trustees. He is the
Vice-Chairman and Managing Director of First Reserve Corporation, a
registered investment advisor investing in companies in the world-wide
energy industry on behalf of institutional investors.
Prior to acquiring First Reserve in 1983, Mr. Hill held executive
positions with several investment advisory firms and held various
positions with the Federal government, including Associate Director of the
Office of Management and Budget and Deputy Administrator of the Federal
Energy Administration.
Mr. Hill currently also serves as a Director of Devon Energy Corporation,
an exploration and production company, TransMontaingne Oil Company, a
refined oil product pipeline and distribution company, St.
Lukes-Roosevelt, a New York City hospital and various private companies
controlled by First Reserve Corporation. He is also a Member of the Board
of Advisors of Fund Directions. He is currently active in various business
associations, including the Economic Club of New York, and lectures on
energy issues in the United States and Europe. Mr. Hill is a graduate of
Southern Methodist University.
> Ronald J. Jackson
[Photo of Ronald J. Jackson]
Mr. Jackson, born December 17, 1943, retired as Chairman of the Board,
President and Chief Executive Officer of Fisher-Price, Inc., a major toy
manufacturer, in 1993, a position which he held since 1990. He previously
served as President and Chief Executive Officer of Stride-Rite, Inc., a
manufacturer and distributor of footwear, from 1989 to 1990,
7
Nominees for Trustees
and as President and Chief Executive Officer of Kenner Parker Toys, Inc.,
a major toy and game manufacturer, from 1985 to 1987. Prior to that, he
held various financial and marketing positions at General Mills, Inc. from
1966 to 1985, including Vice President, Controller and Vice President of
Marketing for Parker Brothers, a toy and game company, and President of
Talbots, a retailer and direct marketer of women's apparel. Mr. Jackson is
a graduate of Michigan State University Business School.
> Paul L. Joskow
[Photo of Paul L. Joskow]
Dr. Joskow, born June 30, 1947, is Elizabeth and James Killian Professor
of Economics and Director of the Center for Energy and Environmental
Policy Research at the Massachusetts Institute of Technology. He has
published five books and numerous articles on topics in industrial
organization, government regulation of industry, and competition policy.
Dr. Joskow currently serves as a Director of the National Grid Group, a UK
based holding company with interests in electric power and
telecommunications networks, State Farm Indemnity Company, an automobile
insurance company, and the Whitehead Institute for Biomedical Research, a
non-profit research institution. He has been President of the Yale
University Council since 1993.
Dr. Joskow is active on industry restructuring, environmental, energy,
competition, and privatization policies and has served as an advisor to
governments and corporations around the world.
Dr. Joskow is a graduate of Cornell University and Yale University. He is
a Fellow of the Econometric Society and the American Academy of Arts and
Sciences.
8
Nominees for Trustees
> Elizabeth T. Kennan
[Photo of Elizabeth T. Kennan]
Dr. Kennan, born February 25, 1938, is President Emeritus of Mount Holyoke
College. From 1978 through June 1995, she was President of Mount Holyoke
College. From 1966 to 1978, she was on the faculty of Catholic University,
where she taught history, published numerous articles, and directed the
post-doctoral programs in Patristic and Medieval Studies.
Dr. Kennan currently also serves as a director of Northeast Utilities,
Talbots and Cambus-Kenneth Bloodstock, a corporation involved in
thoroughbred horse breeding and farming. She is a member of The Folger
Shakespeare Library Committee and a trustee of Franklin Pierce College.
Dr. Kennan previously served as a director of Bell Atlantic Corporation,
Chastain Real Estate and Kentucky Home Life Insurance. Active in various
educational and civic associations, Dr. Kennan is a graduate of Mount
Holyoke College, the University of Washington, and St. Hilda's College,
Oxford University. She holds several honorary doctorates.
> Lawrence J. Lasser*
[Photo of Lawrence J. Lasser*]
Mr. Lasser, born November 1, 1942, is a Vice President of your fund and
each of the other Putnam funds. He has been the President, Chief Executive
Officer and a Director of Putnam Investments, LLC and Putnam Management
since 1985, having begun his career there in 1969.
Mr. Lasser currently also serves as a Director of Marsh & McLennan
Companies, Inc., the parent company of Putnam Management. He is a Member
of the Board of Directors of the United Way of Massachusetts Bay, a Member
of the Board of Governors of the Investment Company Institute, a Trustee
of the Museum of Fine Arts, Boston, a Trustee and Member of the Finance
and Executive Committees of the Beth Israel
9
Nominees for Trustees
Deaconess Medical Center, Boston and a Member of the CareGroup Board of
Managers Investment Committee, the Council on Foreign Relations, and the
Commercial Club of Boston. Mr. Lasser is a graduate of Antioch College and
Harvard Business School.
> John H. Mullin, III
[Photo of John H. Mullin, III]
Mr. Mullin, born June 15, 1941, is Chairman and CEO of Ridgeway Farm, a
limited liability company engaged in timber activities and farming. Prior
to establishing Ridgeway Farm in 1989, Mr. Mullin was a Managing Director
of Dillon, Read & Co. Inc., an investment banking firm.
Mr. Mullin currently serves as a Director of Graphic Packaging
International Corp., a company engaged in the manufacture of packaging
products, Alex. Brown Realty, Inc., a real estate investment company,
Progress Energy, Inc., a public utility company, and The Liberty
Corporation, a company engaged in the broadcasting industry. Mr. Mullin
previously served as a Director of Dillon, Read & Co. Inc., Adolph Coors
Company, Crystal Brands, Inc., Fisher-Price, Inc., Mattel, Inc. and The
Ryland Group, Inc. Mr. Mullin is a Trustee Emeritus of Washington & Lee
University where he served as Chairman of the Investment Committee. Mr.
Mullin is a graduate of Washington & Lee University and The Wharton
Graduate School at the University of Pennsylvania.
> Robert E. Patterson
[Photo of Robert E. Patterson]
Mr. Patterson, born March 15, 1945, is the President and a Trustee of
Cabot Industrial Trust, a publicly traded real estate investment trust.
Prior to February, 1998 he was Executive Vice President and Director of
Acquisitions of Cabot Partners Limited Partnership, a registered
investment advisor which managed real estate investments for institutional
10
Nominees for Trustees
investors. Prior to 1990, he was the Executive Vice President of Cabot,
Cabot & Forbes Realty Advisors, Inc., the predecessor company of Cabot
Partners. Prior to that, he was a Senior Vice President of the Beal
Companies, a real estate management, investment and development company.
He has also worked as an attorney and held various positions in state
government, including the founding Executive Director of the Massachusetts
Industrial Finance Agency.
Mr. Patterson currently also serves as Chairman of the Joslin Diabetes
Center, a Trustee of SEA Education Association and a Director of
Brandywine Trust Company. Mr. Patterson is a graduate of Harvard College
and Harvard Law School.
> George Putnam, III*
[Photo of George Putnam, III]
Mr. Putnam, born August 10, 1951, is the President of your Fund and each
of the other Putnam Funds. He is also President of New Generation
Research, Inc., a publisher of financial advisory and other research
services relating to bankrupt and distressed companies, and New Generation
Advisers, Inc., a registered investment advisor which provides advice to
private funds specializing in investments in such companies. Prior to
founding New Generation in 1985, Mr. Putnam was an attorney with the
Philadelphia law firm Dechert Price & Rhoads.
Mr. Putnam currently also serves as a Director of The Boston Family
Office, L.L.C., a registered investment advisor that provides financial
advice to individuals and families. He is also a Trustee of the SEA
Education Association and St. Mark's School. Mr. Putnam is a graduate of
Harvard College, Harvard Business School and Harvard Law School.
11
Nominees for Trustees
> A.J.C. Smith*
[Photo of A.J.C. Smith]
Mr. Smith, born April 13, 1934, is a Director of Marsh & McLennan
Companies, Inc. From May 1992 to November 1999, he served as the company's
Chairman and Chief Executive Officer and from November 1999 to May 2000,
he served as Chairman. He has been employed by Marsh & McLennan and
related companies in various capacities since 1961. Mr. Smith is a
Director of the Trident Corp.; a Trustee of the Carnegie Hall Society, the
Central Park Conservancy, the Educational Broadcasting Corporation, the
Economic Club of New York, and the U.S. Chamber of Commerce; a Member of
the Board of Overseers of the Joan and Sanford I. Weill Graduate School of
Medical Sciences of Cornell University; and a Founder of the Museum of
Scotland Society. He was educated in Scotland and is a Fellow of the
Faculty of Actuaries in Edinburgh, a Fellow of the Canadian Institute of
Actuaries, a Fellow of the Conference of Actuaries, an Associate of the
Society of Actuaries, a Member of the American Academy of Actuaries, the
International Actuarial Association and the International Association of
Consulting Actuaries.
> W. Thomas Stephens
[Photo of W. Thomas Stephens]
Mr. Stephens, born September 2, 1942, was, until 1999, the President and
Chief Executive Officer of MacMillan Bloedel Limited, a forest products
and building materials company. In 1996, Mr. Stephens retired as Chairman
of the Board of Directors, President and Chief Executive Officer of Johns
Manville Corporation.
Mr. Stephens serves as Chairman of Mail-Well, a printing and envelope
company, a Director for Qwest Communications, a communications company,
Xeel, a public utility company,
12
Nominees for Trustees
TransCanada Pipelines, and Norske Skog Canada, a paper manufacturer. Mr.
Stephens has B.S. and M.S. degrees from the University of Arkansas.
> W. Nicholas Thorndike
[Photo of W. Nicholas Thorndike]
Mr. Thorndike, born March 28, 1933, serves as a Director of various
corporations and charitable organizations, including Providence Journal
Co., a newspaper publisher, and Courier Corporation, a book binding and
printing company. He is also a Trustee of Cabot Industrial Trust and
Northeastern University, a member of the Advisory Board of National Grid
USA, an electric company, and an Honorary Trustee of Massachusetts General
Hospital, where he previously served as chairman and president. Prior to
December 1988, Mr. Thorndike was the Chairman of the Board and Managing
Partner of Wellington Management Company/Thorndike, Doran, Paine & Lewis,
a registered investment advisor that manages mutual funds and
institutional assets. He also previously served as a Trustee of the
Wellington Group of Funds (now The Vanguard Group) and was the Chairman
and a Director of Ivest Fund, Inc. Mr. Thorndike is a graduate of Harvard
College.
--------------------
*Nominees who are or may be deemed to be "interested persons" (as defined
in the Investment Company Act of 1940) of your fund, Putnam Management,
and Putnam Retail Management, Inc. ("Putnam Retail Management"), the
principal underwriter for all the open-end Putnam funds and an affiliate
of Putnam Management. Messrs. Lasser, Putnam III and Smith are deemed
"interested persons" by virtue of their positions as officers or
affiliates of your fund, or directors of Putnam Management, Putnam Retail
Management, or Marsh & McLennan Companies, Inc., the parent company of
Putnam Management and Putnam Retail Management.
The balance of the nominees are not "interested persons."
13
Nominees for Trustees
--------------------
Except as indicated above, the principal occupations and business
experience of the nominees for the last five years have been with the
employers indicated, although in some cases they have held different
positions with those employers.
All the nominees were elected by the shareholders in June, 2000. The 12
nominees for election as Trustees at the shareholder meeting of your fund
who receive the greatest number of votes will be elected as Trustees of
your fund. The Trustees serve until their successors are elected and
qualified. Each of the nominees has agreed to serve as a Trustee if
elected. If any of the nominees is unavailable for election at the time of
the meeting, which is not anticipated, the Trustees may vote for other
nominees at their discretion, or the Trustees may fix the number of
Trustees at less than 12 for your fund.
The address for each of the current Trustees and each of the nominees is
One Post Office Square, Boston, Massachusetts 02109.
> What are the Trustees' responsibilities?
Your fund's Trustees are responsible for the general oversight of your
fund's affairs and for assuring that your fund is managed in the best
interests of its shareholders. The Trustees regularly review your fund's
investment performance as well as the quality of other services provided
to your fund and its shareholders by Putnam Management and its affiliates,
including administration, custody, and shareholder servicing. At least
annually, the Trustees review and evaluate the fees and operating expenses
paid by your fund for these services and negotiate changes that they deem
appropriate. In carrying out these responsibilities, the Trustees are
assisted by an independent administrative staff and by your fund's
auditors, counsel and other experts as appropriate, selected by and
responsible to the Trustees.
Your fund's Trustees have determined that the efficient conduct of your
fund's affairs makes it desirable to delegate responsibility for certain
specific matters to committees of the board. Certain
14
committees (the Executive Committee, Distributions Committee and Audit
Committee) are authorized to act for the Trustees as specified in their
charters. The other committees review and evaluate matters specified in
their charters and make recommendations to the Trustees as they deem
appropriate. Each committee may utilize the resources of your fund's
independent staff, counsel and auditors as well as other experts. The
committees meet as often as necessary, either in conjunction with regular
meetings of the Trustees or otherwise. The membership and chairman of each
committee are appointed by the Trustees upon recommendation of the Board
Policy and Nominating Committee.
The Investment Company Act of 1940 requires that your fund have a minimum
proportion of trustees who are not affiliated in any way with your fund's
investment manager, principal underwriter from time to time or any
broker-dealer. These independent trustees must vote separately to approve
all financial arrangements and other agreements with your fund's
investment manager and other affiliated parties. The role of independent
trustees has been characterized as that of a "watchdog" charged with
oversight to protect shareholders' interests against overreaching and
abuse by those who are in a position to control or influence a fund. The
Trustees of your fund believe that independent trustees should represent
at least two-thirds of the members of the board. Your fund's independent
trustees meet regularly as a group in executive session.
> How large a stake do the Trustees have in the Putnam family of funds?
The Trustees believe each Trustee should have a significant investment in
the Putnam funds. This table shows the value of their holdings in the
Putnam funds.
Each Trustee over $100,000
Trustees as a group over $29,000,000
The Trustees allocate their investments among the approximately 125 Putnam
funds based on their own investment needs. The table below shows each
Trustee's current investment in your fund.
15
Putnam
Master
Year first Intermediate
elected as Income
Trustee of the Trust
Trustees Putnam funds (# of shares)(1)
----------------------- ---------------- -----------------
Jameson A. Baxter 1994 257
Hans H. Estin 1972 587
John A. Hill 1985 196
Ronald J. Jackson 1996 391(2)
Paul L. Joskow 1997 100
Elizabeth T. Kennan 1992 342(3)
Lawrence J. Lasser 1992 196
John H. Mullin, III 1997 100
Robert E. Patterson 1984 587
George Putnam, III 1984 978
A.J.C. Smith 1986 391(2)
W. Thomas Stephens 1997 100
W. Nicholas Thorndike 1992 429
----------------------- ---- -----
(1)Except as otherwise noted, each Trustee has sole voting power and sole
invest ment power with respect to his or her shares of your fund.
(2)Includes shares over which the Trustee has shared investment and shared
voting power.
(3)Includes shares held in a trust over which the Trustee has investment and
voting power.
The Trustees' ownership is based on beneficial ownership as of January 31,
2001. The value of shares owned by the Trustees has been determined as of
that same date.
The Trustees and officers of your fund owned a total of 4,654 shares of the
fund as of that date, comprising less than 1% of the outstanding shares of
the fund.
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> What are some of the ways in which the Trustees represent shareholder
interests?
The Trustees believe that, as substantial investors in the Putnam funds,
their interests are closely aligned with those of individual shareholders.
Among other ways, the Trustees seek to represent shareholder interests:
o by carefully reviewing your fund's investment performance on an
individual basis with your fund's managers;
o by also carefully reviewing the quality of the various other services
provided to the funds and their shareholders by Putnam Management and
its affiliates;
o by discussing with senior management of Putnam Management steps being
taken to address any performance deficiencies;
o by conducting an in-depth review of the fees paid by each fund and by
negotiating with Putnam Management to ensure that such fees remain
reasonable and competitive with those of other mutual funds, while at
the same time providing Putnam Management sufficient resources to
continue to provide high quality services in the future;
o by reviewing brokerage costs and fees, allocations among brokers, soft
dollar expenditures and similar expenses of each fund;
o by monitoring potential conflicts between the funds and Putnam
Management and its affiliates to ensure that the funds continue to be
managed in the best interests of their shareholders; and
o by also monitoring potential conflicts among funds to ensure that
shareholders continue to realize the benefits of participation in a
large and diverse family of funds.
17
> How often do the Trustees meet?
The Trustees meet each month (except August) over a two-day period to
review the operations of your fund and of the other Putnam funds. A
portion of these meetings is devoted to meetings of various committees of
the board which focus on particular matters. These currently include: the
Contract Committee, which reviews all the contractual arrangements with
Putnam Management and its affiliates; the Communication, Service and
Marketing Committee, which reviews the quality of services provided by
your fund's investor servicing agent and custodian; the Brokerage and
Custody Committee, which reviews matters relating to custody of
securities, best execution, brokerage costs and allocations and new
investment techniques; the Audit Committee, which reviews procedures for
the valuation of securities, the fund's accounting policies and the
adequacy of internal controls and supervises the engagement of the fund's
auditors; the Board Policy and Nominating Committee, which reviews the
compensation of the Trustees and their administrative staff, reviews the
conduct of the fund's legal affairs, evaluates and recommends candidates
for election as Trustees and recommends the appointment of members and
chairs each board committee; the Distributions and Closed-End Funds
Committee, which is responsible for reviewing special issues applicable to
closed-end funds and the Pricing Committee, which reviews procedures for
the valuation of securities.
Each Trustee generally attends at least two formal committee meetings
during each regular meeting of the Trustees. During 2000, the average
Trustee participated in approximately 40 committee and board meetings. In
addition, the Trustees meet in small groups with Chief Investment Officers
and Portfolio Managers to review recent performance and the current
investment climate for selected funds. These meetings ensure that each
fund's performance is reviewed in detail at least twice a year. The
Contract Committee typically meets on
18
several additional occasions during the year to carry out its
responsibilities. Other committees, including an Executive Committee, may
also meet on special occasions as the need arises.
> What are the Trustees paid for their services?
Each Trustee of your fund receives a fee for his or her services. Each
Trustee also receives fees for serving as Trustee of the other Putnam
funds. The Trustees periodically review their fees to assure that such
fees continue to be appropriate in light of their responsibilities as well
as in relation to fees paid to trustees of other mutual fund complexes.
The Board Policy and Nominating Committee, which consists solely of
Trustees not affiliated with Putnam Management, estimates that Committee
and Trustee meeting time, together with the appropriate preparation,
requires the equivalent of at least three business days per Trustee
meeting. The following table shows the fees paid to each Trustee by your
fund for its most recent fiscal year and the fees paid to each Trustee by
all of the Putnam funds during calendar year 2000:
19
PUTNAM MASTER INTERMEDIATE INCOME TRUST
Compensation Table
Estimated
Pension or annual
retirement benefits
benefits from all
Aggregate accrued Putnam Total
compensation as part funds compensation
from the of fund upon from all
Trustee/Year fund(1) expenses retirement(2) Putnam funds(3)
------------------------------ -------------- ------------ --------------- ----------------
Jameson A. Baxter/1994(4) $1,099 $244 $100,000 $200,000
Hans H. Estin/1972 1,102 549 100,000 200,500
John A. Hill/1985(4)(5)(8) 1,203 278 200,000 269,000
Ronald J. Jackson/1996(4) 1,099 336 100,000 200,000
Paul L. Joskow/1997(4) 1,099 135 100,000 200,000
Elizabeth T. Kennan/1992 1,096 361 100,000 199,500
Lawrence J. Lasser/1992(7) 1,099 275 92,500 107,000
John H. Mullin, III/1997(4) 1,093 202 100,000 199,000
Robert E. Patterson/1984 1,099 187 100,000 200,000
William F. Pounds/1971(5)(6) 1,187 633 111,000 127,000
George Putnam/1957(6) 1,077 537 91,834 107,000
George Putnam, III/1984(8) 1,099 127 150,000 225,000
A.J.C. Smith/1986(7) 1,083 401 91,833 106,000
W. Thomas Stephens/1997(4) 1,091 189 100,000 198,500
W. Nicholas Thorndike/1992 1,083 506 100,000 197,000
------------------------------ ------ ---- -------- --------
(1)Includes an annual retainer and an attendance fee for each meeting attended.
(2)Assumes that each Trustee retires at the normal retirement date. For
Trustees who are not within three years of retirement, estimated benefits for
each Trustee are based on Trustee fee rates in effect during calendar
2000.
(3)As of December 31, 2000, there were 124 funds in the Putnam family.
(4)Includes compensation deferred pursuant to a Trustee Compensation Deferral
Plan. The total amounts of deferred compensation payable by the fund to Mr.
Hill, Mr. Jackson, Mr. Joskow, Mr. Mullin, and Mr. Stephens as of September
30, 2000 were $11,033, $5,330, $1,040, $3,356, and $2,344, respectively,
including income earned on such amounts.
(5)Includes additional compensation for services through June 30, 2000.
(6)Reflects retirement from the Board of Trustees of the Putnam funds on June
30, 2000.
(7)Commencing July 1, 2000, Marsh & McLennan Companies, Inc., compensates Mr.
Lasser and Mr. Smith for their services as Trustees. The estimated annual
retirement benefits and related fund expenses shown in this table for Messrs.
Lasser and Smith reflect benefits earned under the Funds' retirement plan
prior to that date.
(8)Includes additional compensation for services commencing July 1, 2000.
20
Under a Retirement Plan for Trustees of the Putnam funds (the "Plan"),
each Trustee who retires with at least five years of service as a Trustee
of the funds is entitled to receive an annual retirement benefit equal to
one-half of the average annual compensation paid to such Trustee by the
funds for the last three years of service prior to retirement. This
retirement benefit is payable during a Trustee's lifetime, beginning the
year following retirement, for a number of years equal to such Trustee's
years of service compensated by the funds. A death benefit is also
available under the Plan which assures that the Trustee and his or her
beneficiaries will receive benefit payments for the lesser of an aggregate
period of (i) ten years or (ii) such Trustee's total years of service.
The Plan Administrator (a committee comprised of Trustees that are not
"interested persons" of the fund, as defined in the Investment Company Act
of 1940) may terminate or amend the Plan at any time, but no termination
or amendment will result in a reduction in the amount of benefits (i)
currently being paid to a Trustee at the time of such termination or
amendment, or (ii) to which a current Trustee would have been entitled had
he or she retired immediately prior to such termination or amendment.
For additional information about your fund, including further information
about its Trustees and officers, please see "Fund Information," on page
37.
2. APPROVAL OR DISAPPROVAL OF THE CONVERSION OF YOUR FUND FROM CLOSED-END TO
OPEN-END STATUS AND CERTAIN RELATED AMENDMENTS TO YOUR FUND'S AGREEMENT
AND DECLARATION OF TRUST
> What is being considered under this item?
Shareholders will have the opportunity to vote at the meeting on the
question of whether your fund should be converted from a closed-end fund
to an open-end fund. The Trustees, as
21
discussed in more detail below, unanimously recommend that shareholders
vote against converting your fund to an open-end fund. This recommendation
is based on the Trustees' view that, as a closed-end fund, your fund is
afforded significant investment advantages.
If approved, the conversion would result in the "delisting" of your fund's
shares from the New York Stock Exchange where they currently may be bought
or sold at prevailing market prices. Your shares would then become
redeemable directly from your fund at net asset value, eliminating any
discount of market price to net asset value. Other differences between
closed-end and open-end investment companies are described below.
A conversion from closed-end to open-end status would also require a
number of changes in the Agreement and Declaration of Trust (the
"Declaration of Trust") under which your fund was established.
Accordingly, approval of this proposal would also authorize your fund's
Trustees to make such amendments as they may deem necessary to operate
your fund in open-end form if this proposal is approved. These changes are
described in greater detail below.
> Why is this question being submitted to shareholders now?
Your fund's governing legal documents require that shareholders of your
fund be given the opportunity to vote on a proposal to convert your fund
from closed-end to open-end status if the fund's shares have traded at an
average discount of more than 10% from their net asset value during the
last twelve calendar weeks of the preceding fiscal year (measured as of
the last trading day in each such week). For the twelve-week period ended
September 29, 2000, your fund's shares traded at an average discount of
10.96%, requiring that this proposal be submitted to shareholders. A
similar vote was held at the July 11, 1996 and July 10, 1997 annual
meetings of shareholders. At those meetings shareholders voted to retain
closed-end status as follows:
22
July 11, 1996 Annual Meeting July 10, 1997 Annual Meeting
Percentage of Shares Voted Percentage of Shares Voted
------------------------------------------ -----------------------------------
For Open-ending 22.73% For Open-ending 13.55%
Against Open-ending 68.40% Against Open-ending 77.16%
Abstain 8.87% Abstain 9.29%
---------------------------- ----- --------------------- -----
> What is the recommendation of the Trustees?
The Trustees regularly review the overall performance and trading
information for your fund and all of the Putnam closed-end funds. At
meetings held in February and March of this year, the Trustees of your
fund carefully evaluated the fund's investment performance, the trading
history of its shares since its inception in April 1988, and information
about the possible advantages and disadvantages of converting to an
open-end fund. For the reasons described below, the Trustees of your fund
have unanimously concluded that the conversion of your fund to open-end
status would not be in the best long-term interests of shareholders.
Accordingly, the Trustees of your fund unanimously recommend that
shareholders vote "AGAINST" this proposal.
> Why are the Trustees recommending a vote against a conversion?
The Trustees of your fund are recommending a vote against converting your
fund to open-end status for the following reasons:
o The Trustees believe that your fund's closed-end status provides
investment benefits not available to open-end fund investors. Because
your fund's shares are not redeemable, your fund is not required to
maintain short-term, lower-yielding investments in anticipation of
possible redemptions, but can be fully invested in higher-yielding
securities in pursuit of the fund's investment objective. Furthermore,
as a closed-end fund, your fund does not experience the cash flows
associated with sales and redemptions of open-
23
end fund shares. As a result, your fund's portfolio manager does not
have to invest additional cash from new sales at times when market
conditions are unfavorable or sell securities to meet redemptions at
inopportune times.
o The Trustees believe that your fund's operating expenses are likely to
increase if it is converted to open-end status. As an open-end fund,
your fund would be required, as a practical matter, to make a continuous
public offering of its shares in order to offset redemptions and
maintain the economies of scale available at its current size. The
Trustees expect that in order to market your fund's shares effectively
and to conform generally to sales practices of competing dealer-sold
funds, following a conversion to open-end status, the Trustees would
likely recommend that shareholders approve the adoption of a
distribution plan under Rule 12b-1. Such a plan would permit your fund
to pay annual distribution fees of up to 0.35% of your fund's net
assets. If such a distribution plan were approved, the Trustees would
expect to authorize the payment of distribution fees at the annual rate
of 0.25% of net assets, as is the case with similar open-end Putnam
funds. In addition, all shareholders would bear the brokerage and other
transactional costs associated with purchases and sales of securities by
your fund in response to the sale or redemption of shares if your fund
were converted to open-end status (except to the extent that the
Trustees decide to impose a temporary redemption fee, as described
below).
o It is possible that redemptions by shareholders would cause your fund to
shrink following conversion to open-end status, resulting in an
increased expense ratio for remaining shareholders. However, open-end
funds, which continually offer new shares to the public, also have the
ability to increase in size. Growth in your fund's size could result in
efficiencies and spread fixed costs over a larger pool of assets. Putnam
Management has advised the Trustees that it is
24
likely that your fund would experience significant net redemptions
following any conversion, thereby shrinking in size. Depending on the
size of future redemptions or sales, increased expense ratios could
result for either temporary or indefinite periods.
o The need to sell securities to meet redemptions may have adverse tax
consequences to shareholders remaining in your fund. If your fund sells
securities to meet redemptions and realizes a gain for tax purposes, in
order to eliminate fund-level tax your fund may make distributions and
distribute the tax gain to all remaining shareholders.
o In light of the potential loss of the advantages of closed-end status
and the increase of expenses that would likely follow, conversion could
result in a lower yield for the shareholders. This result is
inconsistent with the fund's investment objective of seeking high
current income.
o The Trustees believe that most shareholders of your fund purchased their
shares with a long-term investment perspective that recognizes the
special advantages of the closed-end structure as well as the
disadvantages of potential discounts. Consequently, the Trustees do not
believe that recent discount levels should be viewed as grounds for
depriving shareholders of the advantages of the closed-end structure.
> Are there any advantages to converting the fund to
open-end status?
Yes. The Trustees have weighed the advantages of a closed-end structure
against the advantages to shareholders that would come with converting the
fund to open-end status. By converting to an open-end fund, your fund
would immediately offer you the ability to redeem your shares at their net
asset value less any redemption fee that the Trustees may impose. As of
January 31, 2001, the price of your shares in the fund represented a
discount of 6.75% to their net asset value. This
25
means that if you sold shares on January 31, 2001 you would have received
only 93.25% of your pro rata share of your fund's assets. If the fund were
converted, you would be able to receive 100% of your pro rata share less
any redemption fee imposed by the Trustees. This would represent a
one-time increase in the value of your shares.
The Trustees have also considered the potential decrease in expense ratio
that would arise if your fund grows in size as a result of net sales of
new shares. As an open-end fund your fund would constantly be offering new
shares to the public. If more new shares are sold than redeemed, the fund
could grow in size, resulting in a lower effective management fee and a
lower expense ratio. As stated above, Putnam Management has advised the
Trustees that Putnam Management does not expect that the fund would grow
in size following a conversion to open-end status.
After considering the reasons set forth above, the Trustees do not believe
that the current discount justifies the fundamental changes that would
result from a conversion to open-end status. The Trustees unanimously
recommend that shareholders vote against this proposal.
> How has your fund performed?
The following table summarizes the annualized total return of your fund
for the periods shown based on the net asset value and the market value of
its shares:
Total Return (Annualized) Through January 31, 2001
1 year 3 years 5 years 10 years
---------- --------- --------- -----------
Net Asset Value 5.64% 3.02% 5.16% 8.63%
Market Value 20.95% 3.24% 5.65% 9.17%
----------------- ----- ---- ---- -----
Of course, relative performance is also important. In addition to
reviewing the fund's overall performance, the Trustees regularly review
the fund's performance compared to that of a group of comparable funds.
26
To compare the funds, the Trustees use a formula to assign each fund a
value that is based 40% on the fund's twelve-month dividend yield, 30% on
the fund's cumulative three-year annual total return and 30% on the
three-year standard deviation of the fund's annual total returns. Using
this formula, as of January 31, 2001, your fund was ranked in the 37th
percentile among funds in its peer group (with 1% representing the highest
relative performance and 100% representing the lowest). Past performance
is no guarantee of future performance.
> What are the principal differences between a closed-end and open-end fund?
In evaluating this proposal, shareholders may wish to consider the
following differences between closed-end and open-end funds:
o Changes in capital. Closed-end funds raise their capital through an
initial public offering and generally do not raise additional capital
after that time. Closed-end funds therefore have limited opportunities
to gain additional economies of scale through growth of assets. At the
same time, because shares of closed-end funds cannot be redeemed, the
risk of higher expense ratios resulting from a decline in assets is also
limited.
Open-end funds, in contrast, generally engage in a continuous public
offering of their shares, which provides the opportunity for growth of
assets and reduced expense ratios. However, because shares of open-end
funds are generally redeemable at any time, such funds face the risk of
higher expense ratios if significant redemptions are not offset by sales
of new shares.
o Sale of shares. Shares of open-end funds may be redeemed at any time at
their net asset value (subject only to the right of the fund to withhold
payment for up to seven days or, with the permission of the SEC, to
suspend
27
redemptions under emergency conditions). In contrast, shares of
closed-end funds are not redeemable and can generally be bought and sold
at current market prices only on the exchange on which such funds are
listed. Thus, converting your fund from closed-end to open-end status
would eliminate the current discount between market price and net asset
value. Shareholders who wish to dispose of shares would receive a higher
price at net asset value than if shares remained at a discount.
o Regulatory requirements. Both closed-end and open-end funds are
registered with the SEC under the Investment Company Act of 1940 and,
with certain differences relating largely to the sale and redemption of
shares, are generally subject to the same regulatory requirements of
that Act. Your fund's shares are listed for trading on the New York
Stock Exchange. That listing would be terminated in the event of a
conversion to open-end status. Since open-end funds generally engage in
a continuous public offering of their shares they are required to
maintain current registrations under federal and state securities laws,
which involves additional costs.
o Annual shareholder meetings. Your fund is currently required by the
rules of the New York Stock Exchange to hold annual meetings of
shareholders for the purpose of electing Trustees. As noted above,
conversion of your fund to open-end status would result in termination
of the fund's listing on the New York Stock Exchange with the result
that your fund would no longer be required to hold annual meetings. In
such event, your fund expects that meetings would be held only on an
as-needed basis.
o Investment flexibility. As noted above, the cash flows associated with
sales and redemptions of open-end fund shares, as well as the need to
maintain cash reserves in
28
anticipation of possible redemptions, might tend to reduce the
investment flexibility of open-end funds.
o Shareholder privileges. Shareholders of your fund currently have the
option of participating in the fund's Dividend Reinvestment Plan, under
which cash distributions paid by your fund are generally reinvested
through the purchase of additional fund shares at market prices, which
currently reflect a discount from net asset value. (At times when your
fund's shares are trading at a premium over their net asset value, such
reinvestments are made at the higher of net asset value or 95% of market
value.) If the fund were to convert to open-end status, shareholders
would no longer be able to reinvest dividends at a price below net asset
value per share. Shareholders of open-end Putnam funds have the option
to reinvest their distributions in additional shares at net asset value
at all times.
Shareholders of open-end funds in the Putnam family of funds currently
have the privilege of exchanging their investment at net asset value and
without sales charges for shares of more than 75 open-end funds in the
Putnam group. Shareholders of your fund currently do not have that
privilege.
> What other possible consequences might result from conversion of your
fund to open-end status?
In addition to those matters described above, you should consider the
following possible consequences of conversion of your fund to open-end
status:
o Certain legal, accounting and other costs would be incurred in
connection with the conversion of your fund to open-end status. Although
it is difficult to estimate these costs with precision, these costs are
estimated to be at least $100,000. Based on your fund's current size it
is not anticipated that these costs would materially increase your
fund's expense ratio.
29
o The Trustees reserve the right to impose a temporary redemption fee of
up to 2.00% of the value of shares redeemed for a period of up to one
year following the fund's conversion to an open-end investment company.
The Trustees may impose this fee if they believe that immediately
following a conversion to open-end status there would likely be
significant redemptions of shares that would disrupt long-term portfolio
management of the fund and dilute the interests of the remaining
shareholders. Imposition of a redemption fee may deter certain
redemptions and would compensate remaining long-term shareholders for
the costs of the liquidation of a significant percentage of the fund's
portfolio.
The fund will notify shareholders in writing prior to the imposition of
any temporary redemption fee.
> What changes would be made in your fund's Declaration of Trust if
shareholders vote to convert the fund to open-end status?
Conversion of your fund from a closed-end to an open-end fund would
require certain changes to your fund's Declaration of Trust and,
therefore, a vote in favor of such conversion would also authorize the
Trustees to amend your fund's Declaration of Trust to reflect such
changes. These changes would bring your fund's Declaration of Trust more
in line with most other Putnam open-end funds.
The Declaration of Trust would be amended to require your fund to purchase
all shares offered to it for redemption at a price equal to the net asset
value of the shares next determined, less any redemption charge fixed by
the Trustees. In addition, the fund would be authorized, at its option, to
redeem shares held in a shareholder's account at net asset value if at any
time a shareholder owned shares in an amount either less than or greater
than, as the case may be, an
30
amount determined by the Trustees. Notwithstanding this provision, all
shares would be redeemable at a shareholder's option.
The Declaration of Trust would also be amended to eliminate certain
provisions that relate specifically to the fund's closed-end status, such
as the conversion provision that has necessitated this proposal.
Finally, the Trustees would also make certain necessary technical and
non-material changes to the Declaration of Trust and conforming changes to
your fund's Bylaws if the shareholders vote in favor of the conversion.
> What percentage of shareholders' votes are required to approve the
conversion?
Approval of the conversion of your fund to open-end status and of the
related amendments to your fund's Declaration of Trust will require the
"yes" vote of a majority of your fund's outstanding shares entitled to
vote.
If such conversion were approved, the conversion would become effective
following compliance with all necessary regulatory requirements under
federal and state law. Your fund would seek to complete this process as
soon as reasonably practicable, but it is estimated that this process may
require at least several months.
> If the conversion is not approved, will the fund continue in its
current form?
Yes. In the event that shareholders do not approve the conversion of your
fund to open-end status, your fund would continue to operate as a
closed-end fund. Shareholders would be given the opportunity to vote on a
proposed conversion to open-end status in future years if your fund's
shares again trade at discounts sufficient to meet the requirement of the
Declaration of Trust described above.
31
The Trustees believe that the continued operation of your fund as a
closed-end fund is in the best long-term interests of shareholders, and
unanimously recommend a vote against the conversion of your fund to
open-end status at this time.
The Trustees recommend that you vote "AGAINST" Proposal 2.
Further Information About Voting and the Meeting
Quorum and Methods of Tabulation. A majority of the shares entitled to
vote--present in person or represented by proxy--constitutes a quorum for
the transaction of business with respect to any proposal at the meeting
(unless otherwise noted in the proxy statement), Shares represented by
proxies that reflect abstentions and "broker non-votes" (i.e., shares held
by brokers or nominees as to which (i) instructions have not been received
from the beneficial owners or the persons entitled to vote and (ii) the
broker or nominee does not have the discretionary voting power on a
particular matter) will be counted as shares that are present and entitled
to vote on the matter for purposes of determining the presence of a
quorum. Votes cast by proxy or in person at the meeting will be counted by
persons appointed by your fund as tellers for the meeting.
The tellers will count the total number of votes cast "for" approval of a
proposal for purposes of determining whether sufficient affirmative votes
have been cast. With respect to the election of Trustees and, when
applicable, the selection of auditors, neither abstentions nor broker
non-votes have any effect on the outcome of the proposal. With respect to
any other proposals, abstentions and broker non-votes have the effect of a
negative vote on the proposal.
Other business. The Trustees know of no other business to be brought
before the meeting. However, if any other matters properly come before the
meeting, it is their intention that
32
proxies that do not contain specific restrictions to the contrary will be
voted on such matters in accordance with the judgment of the persons named
as proxies in the enclosed form of proxy.
Simultaneous meetings. The meeting of shareholders of your fund is called
to be held at the same time as the meetings of shareholders of certain of
the other Putnam funds. It is anticipated that all meetings will be held
simultaneously.
If any shareholder at the meeting objects to the holding of a simultaneous
meeting and moves for an adjournment of the meeting to a time promptly
after the simultaneous meetings, the persons named as proxies will vote in
favor of such adjournment.
Solicitation of proxies. In addition to soliciting proxies by mail,
Trustees of your fund and employees of Putnam Management, Putnam Fiduciary
Trust Company, and Putnam Retail Management may solicit proxies in person
or by telephone. Your fund may also arrange to have voting instructions
recorded by telephone. The telephone voting procedure is designed to
authenticate shareholders' identities, to allow them to authorize the
voting of their shares in accordance with their instructions and to
confirm that their instructions have been properly recorded. Your fund has
been advised by counsel that these procedures are consistent with the
requirements of applicable law. If these procedures were subject to a
successful legal challenge, such votes would not be counted at the
meeting. Your fund is unaware of any such challenge at this time.
Shareholders would be called at the phone number Putnam Investments has in
its records for their accounts, and would be asked for their Social
Security number or other identifying information. The shareholders would
then be given an opportunity to authorize proxies to vote their shares at
the meeting in accordance with their instructions. To ensure that the
shareholders' instructions have been recorded correctly, they will also
receive a confirmation of their instructions in
33
the mail. A special toll-free number will be available in case the
information contained in the confirmation is incorrect.
Shareholders may have the opportunity to submit their voting instructions
via the Internet by utilizing a program provided by a third party vendor
hired by Putnam Management. The giving of such a proxy will not affect
your right to vote in person should you decide to attend the meeting. To
vote via the Internet, you will need the 14-digit "control" number that
appears on your proxy card. To use the Internet, please access the
Internet address found on your proxy card on the World Wide Web. The
Internet voting procedures are designed to authenticate shareholder
identities, to allow shareholders to give their voting instructions, and
to confirm that shareholders' instructions have been recorded properly.
Shareholders voting via the Internet should understand that there may be
costs associated with Internet access, such as usage charges from Internet
access providers and telephone companies, that must be borne by the
shareholders.
Your fund's Trustees have adopted a general policy of maintaining
confidentiality in the voting of proxies. Consistent with this policy,
your fund may solicit proxies from shareholders who have not voted their
shares or who have abstained from voting.
Persons holding shares as nominees will upon request be reimbursed for
their reasonable expenses in soliciting instructions from their
principals. Your fund has retained at its expense D.F. King & Co. Inc., 77
Water Street, New York, NY 10005, to aid in the solicitation of
instructions for registered and nominee accounts, for a fee not to exceed
$3,000 plus reasonable out-of-pocket expenses for mailing and phone costs.
Revocation of proxies. Proxies, including proxies given by telephone or
over the Internet, may be revoked at any time before they are voted either
(i) by a written revocation
34
received by the Clerk of your fund, (ii) by properly executing a
later-dated proxy, (iii) by recording later-dated voting instructions via
the Internet or (iv) by attending the meeting and voting in person.
Date for receipt of shareholders' proposals for the next annual meeting.
It is currently anticipated that your fund's next annual meeting of
shareholders will be held in June 2002. Shareholder proposals to be
included in the proxy statement for that meeting must be received by your
fund before December 17, 2001. Shareholders who wish to make a proposal at
the June, 2002 annual meeting--other than one that will be included in the
fund's proxy materials--should notify the fund no later than March 2,
2002. The Board Policy and Nominating Committee will also consider
nominees recommended by shareholders of the fund to serve as Trustees,
provided that shareholders submit their recommendations by the above date.
If a shareholder who wishes to present a proposal fails to notify the fund
by this date, the proxies solicited for the meeting will have
discretionary authority to vote on the shareholder's proposal if it is
properly brought before the meeting. If a shareholder makes a timely
notification, the proxies may still exercise discretionary voting
authority under circumstances consistent with the SEC's proxy rules.
Shareholders who wish to propose one or more nominees for election as
Trustees, or to make a proposal fixing the number of Trustees, at the June
2002 annual meeting must provide written notice to the fund (including all
required information) so that such notice is received in good order by the
fund no earlier than March 16, 2002 and no later than April 15, 2002.
Date for receipt of shareholders' proposals for the upcoming annual
meeting on June 14, 2001. Shareholders who wish to propose one or more
nominees for election as Trustees, or to make a proposal fixing the number
of Trustees,
35
at the upcoming June 14, 2001 annual meeting must provide written notice
to the fund (including all required information) so that such notice is
received in good order by the fund no later than May 2, 2001.
Adjournment. If sufficient votes in favor of any of the proposals set
forth in the Notice of the Meeting are not received by the time scheduled
for the meeting, the persons named as proxies may propose adjournments of
the meeting for a period or periods of not more than 60 days in the
aggregate to permit further solicitation of proxies with respect to those
proposals. Any adjournment will require the affirmative vote of a majority
of the votes cast on the question in person or by proxy at the session of
the meeting to be adjourned. The persons named as proxies will vote in
favor of adjournment those proxies that they are entitled to vote in favor
of such proposals. They will vote against adjournment those proxies
required to be voted against such proposals. Your fund pays the costs of
any additional solicitation and of any adjourned session. Any proposals
for which sufficient favorable votes have been received by the time of the
meeting may be acted upon and considered final regardless of whether the
meeting is adjourned to permit additional solicitation with respect to any
other proposal.
Financial information. Your fund's most recent Annual Report dated
September 30, 2000 and filed with the Securities and Exchange Commission
on November 5, 2000 is hereby incorporated by reference into this Proxy
Statement. Your fund will furnish to you upon request and without charge,
a copy of the fund's annual report for its most recent fiscal year, and a
copy of its semiannual report for any subsequent semiannual period. Such
requests may be directed to Putnam Investor Services, P.O. Box 41203,
Providence, RI 02940-1203 or 1-800-225-1581.
36
Fund Information
Putnam Investments. Putnam Investment Management, LLC, the fund's
investment manager, and its affiliate, Putnam Fiduciary Trust Company,
the fund's investor servicing agent and custodian (collectively, the
"Putnam companies"), are owned by Putnam Investments, LLC. Putnam
Investments, LLC is a wholly-owned subsidiary of Putnam Investments Trust,
a holding company that, except for a minority stake owned by employees, is
in turn owned by Marsh & McLennan Companies, Inc., a leading professional
services firm that includes risk and insurance services, investment
management and consulting businesses. The address of Putnam Investments
Trust, Putnam Investments, LLC and each of the Putnam companies is One
Post Office Square, Boston, Massachusetts 02109. The address of the
executive offices of Marsh & McLennan Companies, Inc. is 1166 Avenue of
the Americas, New York, New York 10036.
Limitation of Trustee liability. The Agreement and Declaration of Trust of
each fund provides that the fund will indemnify its Trustees and officers
against liabilities and expenses incurred in connection with litigation in
which they may be involved because of their offices with the fund, except
if it is determined in the manner specified in the Agreement and
Declaration of Trust that they have not acted in good faith in the
reasonable belief that their actions were in the best interests of the
fund or that such indemnification would relieve any officer or Trustee of
any liability to the fund or its shareholders arising by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of his or
her duties. Your fund, at its expense, provides liability insurance for
the benefit of its Trustees and officers.
Independent Auditors. KPMG LLP, 99 High Street, Boston, Massachusetts
02110, independent accountants, has been selected by the Trustees as the
independent auditors of your
37
fund for the current fiscal year. The Audit Committee of the Board of
Trustees unanimously approved the selection of KPMG LLP in July 2000, and
the Trustees unanimously approved such selection in July 2000. Among the
country's preeminent accounting firms, this firm also serves as the
auditor for various other funds in the Putnam family. It was selected
primarily on the basis of its expertise as auditors of investment
companies, the quality of its audit services and the competitiveness of
its fees. A representative of the independent auditors is expected to be
present at the meeting to make statements and to respond to appropriate
questions.
PricewaterhouseCoopers LLP, independent accountants, has previously served
as the independent auditors of your fund. The change in audit firms
reflects the Trustees' decision to continue their policy of having two
audit firms serve the Putnam funds. In the past, the two firms were Price
Waterhouse LLP and Coopers & Lybrand LLP. These firms merged in July,
1998. PricewaterhouseCoopers LLP resigned as independent auditors in July
2000. It has issued no report on the financial statements for either of
the past two fiscal years containing an adverse opinion or a disclaimer of
opinion, or that was qualified as to uncertainty, audit scope or
accounting procedure.
The following table sets forth the aggregate fees billed for professional
services rendered by your fund's principal accountants for the most recent
fiscal year:
Financial Information
Systems Design and
Audit Fees for Implementation All
Audit Fees All Putnam Funds Fees Other Fees
------------ ------------------ ---------------------- -------------
$31,000 $623,000 $0 $1,339,000
38
The fees disclosed in the table above under the caption "Audit Fees" are the
aggregate fees billed for professional services rendered for the audit of your
fund's annual financial statements for the most recent fiscal year. The fees
disclosed under the caption "Audit Fees for All Putnam Funds" are the aggregate
fees billed for professional services rendered for the audits of all Putnam
funds for which your fund's independent accountants served as auditors for each
such fund's most recent fiscal year ending on or before your fund's most recent
fiscal year end. The fees disclosed under the captions "Financial Information
Systems Design and Implementation Fees" and "All Other Fees" include fees
billed for services, if any, rendered for your fund's most recent fiscal year
to your fund, to Putnam Management, the fund's investment manager, and to any
entity controlling, controlled by or under common control with Putnam
Management that provides services to the fund.
The Audit Committee is responsible for making recommendations to the Trustees
as to the selection of your fund's auditors. The Audit Committee has also
established a policy, in addition to other practices and requirements relating
to the selection of the fund's auditors, that all non-audit services proposed
to be performed by your fund's principal accountants for the fund, Putnam
Management and certain related parties be considered and approved by the Audit
Committee or by an authorized representative of the committee in advance of the
provision of such services. This pre-clearance policy calls for the
consideration, among other things, of whether the provision of the proposed
services would be compatible with maintaining the independence of your fund's
principal accountants. The provision of services covered in the table above
under "Financial Information Systems Design and Implementation Fees" and "All
Other Fees" was approved in accordance with such pre-clearance policy.
39
Audit Committee. The members of the Audit Committee of your fund include only
Trustees who are not "interested persons" of the fund or Putnam Management.
Each member of the Audit Committee is "independent" as defined in Sections
303.01(B)(2)(a) and (3) of the listing standards of the New York Stock
Exchange. The Trustees have adopted a written charter for the Audit Committee,
a copy of which is attached to this Proxy Statement as Appendix A. The Audit
Committee currently consists of Dr. Kennan and Messrs. Estin, Mullin and
Stephens (Chairman). During your fund's last fiscal year, the Audit Committee
met 6 times.
The Audit Committee of your fund has submitted the following report:
The Audit Committee has reviewed and discussed with management of your fund the
audited financial statements for the last fiscal year. The Audit Committee has
discussed with your fund's independent auditors the matters required to be
discussed by Statements on Auditing Standard No. 61 (SAS 61). SAS 61 requires
independent auditors to communicate to the Audit Committee matters including,
if applicable: (1) methods used to account for significant unusual
transactions; (2) the effect of significant accounting policies in
controversial or emerging areas for which there is a lack of authoritative
guidance or consensus; (3) the process used by management in formulating
particularly sensitive accounting estimates and the basis for the auditor's
conclusions regarding the reasonableness of those estimates; and (4)
disagreements with management over the application of accounting principles and
certain other matters. The Audit Committee has received the written disclosures
and the letter from your fund's independent accountants required by
Independence Standards Board Standard No. 1 (requiring auditors to make written
disclosures to and discuss with the Audit Committee various matters relating to
the auditor's independence), and has discussed with such accountants the
independence of such accountants.
40
Based on the foregoing review and discussions, the Audit Committee recommends
to the Trustees that the audited financial statements for the last fiscal year
be included in your fund's annual report to shareholders for the last fiscal
year.
Hans H. Estin
Elizabeth T. Kennan
John H. Mullin, III
W. Thomas Stephens (Chairman)
Board Policy and Nominating Committee. The Board Policy and Nominating
Committee consists only of Trustees who are not "interested persons" of your
fund or Putnam Management. The Board Policy and Nominating Committee currently
consists of Dr. Kennan (Chairperson), Messrs. Hill, Patterson and Thorndike.
During the fund's last fiscal year, the Board Policy and Nominating Committee
met 5 times.
Officers and other information. All of the officers of your fund are employees
of Putnam Management or its affiliates. Because of their positions with Putnam
Management or its affiliates or their ownership of stock of Marsh & McLennan
Companies, Inc., the parent corporation of Putnam Investments Trust and
indirectly of Putnam Investments, LLC, Putnam Management and Putnam Fiduciary
Trust Company, Messrs. Putnam, III, Lasser and Smith (nominees for Trustees of
your fund), as well as the officers of your fund, will benefit from the
management fees, custodian fees, and investor servicing fees paid or allowed by
the fund. In addition to George Putnam III and Lawrence J. Lasser, the officers
of your fund are as follows:
41
Year first
elected to
Name (age) office Office
---------------------------- ----------- -------------------------------------------
Charles E. Porter (62) 1989 Managing Director, Putnam Investments,
Executive Vice President; LLC and Putnam Management
Treasurer & Principal
Financial Officer
Patricia C. Flaherty (53) 1993 Senior Vice President, Putnam Investments,
Senior Vice President LLC and Putnam Management
Michael T. Healy (43) 2000 Managing Director, Putnam Investor
Assistant Treasurer & Services and Putnam Investments
Principal Accounting
Officer
Gordon H. Silver (53) 1990 Senior Managing Director, Putnam
Vice President Investments, LLC and Putnam
Management
Ian C. Ferguson (43) 1997 Senior Managing Director, Putnam
Vice President Investments, LLC and Putnam
Management
Brett C. Browchuk (38) 1998 Managing Director, Putnam Management
Vice President
Edward H. D'Alelio (48) 1998 Managing Director, Putnam Management
Vice President
Stephen Oristaglio (45) 1998 Senior Managing Director, Putnam
Vice President Management. Prior to July, 1998, Mr.
Oristaglio was a Managing Director at
Swiss Bank Corp.
Kevin Cronin (40) 2000 Managing Director, Putnam Management.
Vice President Prior to February 1997, Mr. Cronin was a
Vice President and Fund Manager at MFS
Investment Management.
David Waldman* (34) 1998 Managing Director, Putnam Management
Vice President
Richard A. Monaghan** (46) 1999 Managing Director, Putnam Investments,
Vice President LLC, Putnam Management and Putnam
Retail Management, Inc.
Richard G. Leibovitch (36) 2000 Managing Director, Putnam Investments,
Vice President LLC and Putnam Management. Prior to
February 1999, J.P. Morgan
John R. Verani (61) 1987 Senior Vice President, Putnam Investments,
Vice President LLC and Putnam Management
-------------------------------------------------------------------------------
*One of the fund's portfolio managers
**President of Putnam Retail Management, Inc.
42
Assets and shares outstanding of your fund as of January 31, 2001
------------------------------------------------------------------------------
Net assets: $712,192,068
----------
Common shares outstanding: 100,133,125.805 shares
5% beneficial ownership of your fund as of January 31, 2001: None
--------------------------------------------------------------------------------
43
Appendix A
THE PUTNAM FUNDS
AUDIT COMMITTEE CHARTER
Mission. The primary mission of the Audit Committee is to oversee matters
relating to the preparation of the Funds' financial statements. The Committee
will discharge this responsibility through oversight of management, the Funds'
independent auditors and industry developments. The Committee and the Trustees
shall have ultimate authority and responsibility, subject to the rights of
shareholders where applicable, to select, evaluate and replace the Funds'
independent auditors.
Composition. The Committee will be comprised exclusively of Independent
Trustees. The Committee shall have at least three members, who shall
collectively satisfy the independence and expertise requirements of each
exchange on which shares of one or more Putnam Funds are traded.
Assistance. The Committee may seek the assistance of Fund Administration staff,
the Funds' independent auditors and counsel, management and other parties as it
may deem appropriate.
Role of Independent Auditors. The Funds' independent auditors are ultimately
accountable to the Trustees and the Committee.
Specific Duties of Committee. The duties of the Committee include:
Independent Auditor Matters
^ Recommending the selection of independent auditors and evaluating their
performance
^ Recommending fees for independent auditors
^ Reviewing regular reports of independent auditors
^ Reviewing auditor independence
^ Reviewing and approving the scope of any special projects to be undertaken by
independent auditors
^ Reviewing relationship of independent auditors with Funds and management,
including activities outside Fund audits
^ Considering any weaknesses or deficiencies noted by independent auditors
^ Overseeing internal control reviews performed by independent auditors
In performing their duties, the Committee shall be responsible for ensuring
that the independent auditors submit on a periodic basis to the Committee a
formal written statement delineating all relationships between the independent
auditors and the Funds and that the Committee is responsible for actively
engaging in a dialogue with the independent auditors with respect to any
disclosed relationships or services that may impact the objectivity and
independence of the independent auditors and for recommending that the Trustees
take appropriate action in response to the independent auditors' report to
satisfy themselves of the independent auditors' independence.
General Matters
^ Reviewing scope and adequacy of audits
^ Reviewing significant changes in tax and accounting policies
^ Reviewing nature of accounting and tax policies
^ Reviewing special matters impacting accounting issues
Other Matters
^ Reviewing quality of internal accounting function
^ Reviewing regular reports of internal auditors and management
^ Reviewing matters relating to the Funds' Code of Ethics and Putnam
Investments' Code of Ethics
^ Reassessing annually the adequacy of this Charter and recommend any proposed
changes to the full Board of Trustees
^ Reviewing compliance matters
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
Toll-free 1-800-225-1581
68787 4/01
PUTNAM INVESTMENTS Logo
FOR YOUR CONVENIENCE YOU MAY RECORD YOUR VOTING INSTRUCTIONS VIA THE INTENET OR
BY RETURNING THIS PROXY CARD BY MAIL
Your vote is very important. If you choose to record your voting instructions
via the Internet, visit the website at www.https://vote.proxy-direct.com. Please
refer to the instructions below. Your voting instructions will be immediately
confirmed and posted.
To record your voting instructions on the Internet
1. Read the proxy statement.
2. Go to www.https://vote.proxy-direct.com.
3. Enter the 14-digit control number printed on your proxy card.
4. Follow the instructions on the site.
If you vote on the Internet, there is no need to return your proxy card
This is your PROXY CARD.
To vote by mail, please vote this proxy, sign it below, and return it promptly
in the envelope provided. Your vote is important.
PLEASE DETACH AT PERFORATION BEFORE DETACHING
Proxy for a meeting of shareholders to be held on June 14, 2001 for Putnam
Master Intermediate Income Trust.
This proxy is solicited on behalf of the Trustees of the fund.
The undersigned shareholder hereby appoints John Hill, Hans H. Estin, and Robert
E. Patterson, and each of them separately, Proxies, with power of substitution,
and hereby authorizes them to represent such shareholder and to vote, as
designated below, at the meeting of shareholders of Putnam Master Intermediate
Income Trust on June 14, 2001, at 2:00 p.m., Boston time, and at any
adjournments thereof, all of the shares of the fund that the undersigned
shareholder would be entitled to vote if personally present.
PLEASE BE SURE TO SIGN AND DATE THIS PROXY.
Please sign your name exactly as it appears on this card. If you are a joint
owner, each owner should sign. When signing as executor, administrator,
attorney, trustee, or guardian, or as custodian for a minor, please give your
full title as such. If you are signing for a corporation, please sign the full
corporate name and indicate the signer's office. If you are a partner, sign in
the partnership name.
-------------------------------------------------
Shareholder sign here Date
-------------------------------------------------
Co-owner sign here Date
PUTNAM ACCOUNT NUMBER:
HAS YOUR ADDRESS CHANGED?
Please use this form to notify us of any change in address or telephone number
or to provide us with your comments. Detach this form from the proxy card and
return it with your signed proxy in the enclosed envelope.
Name
--------------------------------------------------------------------------------
Street
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City State Zip
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Telephone
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DO YOU HAVE ANY COMMENTS?
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PLEASE DETACH AT PERFORATION BEFORE MAILING
DEAR SHAREHOLDER:
Your vote is important. Please help us to eliminate the expense of follow-up
mailings by signing and returning this proxy card or by recording your voting
instructions via the internet as soon as possible. A postage-paid envelope is
enclosed for your convenience.
THANK YOU!
PLEASE DETACH AT PERFORATION BEFORE MAILING
If you complete and sign the proxy, we'll vote exactly as you tell us. If you
simply sign the proxy, or fail to provide your voting instructions on a
proposal, the Proxies will vote FOR fixing the number of Trustees and electing
all of the nominees for Trustees as set forth in Proposal 1 and AGAINST Proposal
2. In their discretion, the Proxies will also be authorized to vote upon such
other matters that may properly come before the meeting.
THE TRUSTEES RECOMMEND A VOTE FOR FIXING THE NUMBER OF TRUSTEES AND ELECTING ALL
OF THE NOMINEES FOR TRUSTEES:
Please vote by filling in the appropriate boxes below.
1. Proposal to fix the number of Trustees and elect all nominees. The
nominees for Trustees are: J.A. Baxter, J.A. Hill, R.J. Jackson, P.L.
Joskow, E.T. Kennan, L.J. Lasser, J.H. Mullin, III, R.E. Patterson, G.
Putnam, III, A.J.C. Smith, W.T. Stephens and W.N. Thorndike.
/ / FOR fixing the number of Trustees as proposed and electing all the
nominees (except as marked to the contrary below)
To withhold authority to vote for one or more of the nominees, write the
name(s) of the nominee(s) below:
--------------------------------------
/ / WITHHOLD authority to vote for all nominees
THE TRUSTEES RECOMMEND A VOTE AGAINST PROPOSAL 2:
FOR AGAINST ABSTAIN
2. Proposal to convert / / / / / /
your fund from closed-end to
open-end status and authorize
certain related amendments to the
Agreement and Declaration of Trust.
Note: If you have questions on any of the proposals, please call 1-800-225-1581.
PUTNAM INVESTMENTS (Logo)
P.O. Box 9131
Hingham, MA 02043-9131